Apple Fails In Defending Its Tax Practices

Apple Fails In Defending Its Tax Practices

Apple fails when it comes to defending its tax practices

Over the weekend, the New York Times ran another in its series of exposes about Apple. This one focused on Apple’s complex mix of offices and subsidiaries located throughout the world and the U.S. that allow the company to keep large portions of its more than $100 billion in low-tax states and countries.

The report comes after the paper’s expose on working conditions within Foxconn, the contractor that Apple uses to assemble most of its products and calls by politicians and members of the media for Apple to move more of its manufacturing and money to American soil.

Apple’s statement in response to the accusation that it deliberately uses low or no-tax countries like Ireland, the Virgin Islands, and no income tax states like Nevada failed to make a good case for the company’s international strategies. Apple pretty much repeated earlier statements on how its innovations help drive the U.S. economy.

Some of the main points include the following:

  • Apple has created half a million U.S. jobs – directly and indirectly
  • That majority of Apple’s workforce, not including contractors like Foxconn, live and work in the U.S.
  • The company is very philanthropic even if it doesn’t seek publicity for its charitable contributions
  • Apple has paid $5 billion in income tax within the U.S. so far this year (The Times pointed out that a large portion of that could be the personal income taxes of employees)

This is a case where Apple should have stuck to its characteristic silence rather than issuing the statement that it did. Apple’s response came across as being wishy washy and didn’t really address any of the major points in the original piece.

Personally, I think Apple would’ve been better off pointing out that it is not breaking any laws and, perhaps, noting that many other companies use similar practices – a fact that was noted (and severely downplayed) in the article. Focusing on Apple alone allowed the Times to sensationalize the story. It also allowed the reporters to imply that this is an incident specific to Apple and not a broader issue for the U.S. economy. Covering it in a broader scale could have actually tackled the economic issues facing America as a result of globalization, which would have been a good thing in an election year when the country so politically polarized.

Here’s Apple’s full statement as published by The New Times.

Over the past several years, we have created an incredible number of jobs in the United States. The vast majority of our global work force remains in the U.S., with more than 47,000 full-time employees in all 50 states. By focusing on innovation, we’ve created entirely new products and industries, and more than 500,000 jobs for U.S. workers — from the people who create components for our products to the people who deliver them to our customers. Apple’s international growth is creating jobs domestically since we oversee most of our operations from California. We manufacture parts in the U.S. and export them around the world, and U.S. developers create apps that we sell in over 100 countries. As a result, Apple has been among the top creators of American jobs in the past few years.

Apple also pays an enormous amount of taxes which help our local, state and federal governments. In the first half of fiscal year 2012 our U.S. operations have generated almost $5 billion in federal and state income taxes, including income taxes withheld on employee stock gains, making us among the top payers of U.S. income tax.

We have contributed to many charitable causes but have never sought publicity for doing so. Our focus has been on doing the right thing, not getting credit for it. In 2011, we dramatically expanded the number of deserving organizations we support by initiating a matching gift program for our employees.

Apple has conducted all of its business with the highest of ethical standards, complying with applicable laws and accounting rules. We are incredibly proud of all of Apple’s contributions.

  • JohnWilson

    I agree that the response wasn’t adequate, but not for the reasons you suggest. Apple did point out that they follow all tax laws. What Apple should have done is point out, as this columnist in Fortune did, that the NY Times calculated tax payments for 2010 but compared them to profits for 2011. A huge mistake.

    http://www.forbes.com/sites/timworstall/2012/04/30/apples-9-8-tax-rate-new-york-times-ignorance-again/

  • Dolly Charles

    That this appeared in the NY Times is laughably hypocritical. That it didn’t focus on GE is just laughable.

    The greater issue here is that U.S. corporate taxes are just about the highest in the world, so of course companies are going to do everything they can to reduce them. If they didn’t, shareholders might have a good cause of action.

    The NYT could’ve done a service to the public by using Apple as an example of how counterproductive high taxes are; they can actually reduce revenues. In fact, the article can’t avoid making that point without the writer even wanting to. Reading that Cupertino lawmakers wanted Steve Jobs to provide free services because, well, because…is another example of how California, whose personal income tax is among the highest in the nation and will be going up, drives businesses out of state. And the U.S. drives them offshore.

  • lwdesign1

    Apple pays sales and corporate taxes to the various countries where it sells its products. If Apple sells products in England, they pay the English government all applicable legal sales and corporate taxes. Now why should Apple be forced to bring that money back to the U.S. and be charged an additional 30% on its already taxed income? The NY Times is trying to ride the Foxconn wave of Apple disapproval, even though the vast majority of the accusations about Foxconn have been disproved. Apple is a company in a democratic, free enterprise country. It does not owe the U.S. government any taxes on goods sold outside of the country, nor is it mandatory that it bring these funds back to the U.S. for any reason whatsoever. This is not tax evasion by any means, as Apple pays its full share of taxes in each country it sells in.

  • PhilRead

    Kindly point me to *any* company that pays more taxes than it is legally required to pay – including the New York Times.

  • James Anders

    The NYT hit piece is a joke. Of course, Apple and any othe company (or individual) are going to do their best to pay the minimum amount of tax required by law. Why is this such a surprise? If the NYT wants to cast blame on anyone it should be cast upon the politicians for making such complex, stupid and subjective tax laws.

    This is nothing more than an extension of the anti-business/success climate that seems to dominate the news and politics today.

  • IamJAd

    I don’t fault any company that takes advantage of any pre-existing tax code in any country in which they choose to do business in. That includes Apple, GE, or any other company. It also includes people in their personal taxes.
    If the U.S. wants more of that money brought back home, change the code to entice them back.

About the author

Ryan FaasRyan Faas is a technology journalist and consultant living in upstate New York who has written extensively about Apple, business and enterprise IT, and the mobile industry. In addition to writing for Cult of Mac, he is a contributor to Computerworld, InformIT, and Peachpit Press. In a previous existence he was a healthcare IT director as well as a systems and network administrator. Follow Ryan on Twitter and Google +

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